Oil prices experienced a $1 increase in early trading on Monday as a potential hurricane system approached the U.S. Gulf Coast. This uptick also came as markets rebounded from a selloff triggered by disappointing U.S. jobs data released on Friday.
West Texas Intermediate (WTI) crude futures climbed by $1, or 1.48 percent, reaching $68.67 per barrel by 01:46 GMT. Meanwhile, Brent crude futures rose by 99 cents, or 1.39 percent, to $72.05 per barrel.
Weather-related influences
Analysts noted that this recovery was partly driven by concerns over the approaching hurricane in the Gulf. The U.S. National Hurricane Center reported on Sunday that a weather system in the southwestern Gulf of Mexico is expected to strengthen into a hurricane before impacting the northwestern U.S. Gulf Coast, which represents approximately 60 percent of the nation’s refining capacity.
At the end of trading on Friday, Brent had seen a decline of 10 percent for the week, marking its lowest price point since December 2021, while WTI fell by 8 percent, closing at its lowest since June 2023.
U.S. jobs report impact
A widely anticipated U.S. government jobs report revealed that nonfarm payrolls rose by only 142,000 in August, falling short of market expectations. The previous month’s figure was revised down to a mere 89,000, the smallest increase since December 2020 when a decline was recorded.
Fed rate expectations
Analysts suggested that the drop in the unemployment rate indicates the Federal Reserve may opt for a modest 25 basis point interest rate cut this month, rather than a more aggressive half-point reduction. Typically, lower interest rates can boost oil demand by stimulating economic activity and making oil more affordable for those holding non-dollar currencies.
Read more: OPEC+ members extend voluntary output cuts for two more months as oil prices slump
Demand challenges and refining margins
However, sluggish demand continues to limit price increases. In Asia, refining margins have dipped to their lowest seasonal levels since 2020 due to weak demand from the region’s two largest economies. Additionally, fuel oil exports to the U.S. Gulf Coast fell to their lowest level since January 2019 last month, driven by declining refining margins.
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